Lap Shun Textiles Industrial Co Ltd v. The Collector of Stamp Revenue

HCSA000001/1974

IN THE SUPREME COURT OF HONG KONG

(APPELLATE JURISDICTION)

STAMP APPEAL NO. 1 OF 1974.

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Coram: Huggins & McMullin, JJ.

Date of Judgment: 24th January 1975.

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JUDGMENT

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Huggins, J.:

1. This is an appeal arising in another case where the Collector of Stamp Revenue has taken the view that property has been conveyed at an under value and where he has in consequence sought to charge the conveyance with duty as a voluntary disposition under Head 53(2) by virtue of s.27 of the Stamp Ordinance. The point which is now taken did not arise (or at least if it did arise was not taken) in the recent case of Zung Fu Company, Limited v. The Collector of Stamp Revenue 1973 H.K.L.R. 496, a fact to which attention was drawn in an article at (1974) 4 H.K.L.J. 280. In passing I would, with respect, observe that the learned author of that article appears to have misunderstood the ratio decidendi of that case for nowhere injury judgment or in the argument was it ever suggested that, if the conveyance was properly deemed to be a conveyance operating as a voluntary disposition inter vivos, the duty on the conveyance was to be assessed other wise than under Head 53: what was in issue was the date to be taken by the Collector for the valuation to determine whether the sum paid as consideration was inadequate.

2. The present appeal is against a judgment of Judge Garcia dismissing an appeal by way of case stated against an assessment by the Collector of Stamp Revenue of the duty payable on a conveyance dated 8th February 1973. It was contended that the Collector had no power under s.27 to charge the conveyance as a voluntary disposition inter vivos, but the learned judge held that he was entitled so to do.

3. It is common ground that the conveyance was a conveyance on sale, which prima facie fell to be assessed under Head 19(2) on the amount or value of the consideration on the day of the date of the instrument. The stated consideration was $16,465.68 and it is conceded that that was the whole consideration for the conveyance. It was further agreed that in fixing the consideration the parties to the agreement bargained at arm's length and that the Appellants (the purchasers) acted in good faith.

4. The contention of the Collector was that the true value of the property was not $16,465.68 but $37,500 and that by virtue of the provisions of s.27 the duty was therefore assessable under Head 53(2). Section 27(1) provides that, with exceptions which are not material to this case, any voluntary disposition inter vivos and "any conveyance or transfer operating as a disposition inter vivos" shall be charged under Head 53 and it is not disputed that if the present conveyance comes within that subsection then it is chargeable under Sub-head (2) of Head 53. The broad subject of dispute is whether the conveyance is one operating as a voluntary disposition inter vivos. Subsection (4) then provides:

"Any conveyance or transfer (not being a disposition made in favour of a purchaser or incumbrancer or other person in good faith and for valuable consideration) shall for the purposes of this section be deemed to be a conveyance or transfer operating as a voluntary disposition inter vivos, and (except where a marriage is the consideration) the consideration for any conveyance or transfer shall not for this purpose be deemed to be valuable consideration where the Collector is of opinion that by reason of the inadequacy of the sum paid as consideration or other circumstances the conveyance or transfer confers a substantial benefit on the person to whom the property is conveyed or transferred".

The Collector took the view that the Appellants' conveyance was one which was not "a disposition made in favour of a purchaser ... in good faith and for valuable consideration" and was therefore not excluded from being deemed to be a voluntary disposition inter vivos. His reasoning was that the words "valuable consideration" had the special meaning assigned to them by the second part of the subsection, that is to say a consideration which the Collector did not think inadequate and which he did not think, by its inadequacy, resulted in the conveyance's conferring a substantial benefit on the Appellants as purchasers. The Appellants, on the other hand, submit that the words "valuable consideration" in the parenthesis are not governed by the second part of the subsection and that they (the Appellants) are what they appeared to be, purchasers in good faith for valuable consideration, so that their conveyance is not to be deemed to be a conveyance operating as a voluntary disposition inter vivos.

5. On any view this is a most unhappily worded provision and the first observation one must make about it is that when, in the second part of the subsection, the Legislature said "it shall not be deemed to be", it must have intended to say "it shall be deemed not to be", for there is no reason why the consideration for any conveyance or transfer should be deemed to be valuable consideration. Secondly, in the first part of the subsection the words "shall ... be deemed to be a conveyance ... operating as a voluntary disposition inter vivos cannot, it seems to me, mean anything more than "shall operate as a voluntary disposition inter vivos".

6. The second part of sub-s.(4) is concerned with a wholly artificial concept, namely that a consideration which is in law valuable is to be deemed to be not valuable - with the consequence that the conveyance operates as a voluntary disposition inter vivos. In the end I think the ease turns upon the meaning of the words "for this purpose" in that part of the subsection. No "purpose" of any kind having been previously mentioned the Legislature presumably intended to say "for the purpose of deciding this", but even so it is still arguable to what "this" refers. If the meaning is 'for the purpose of deciding, in the words of the parenthesis, whether a conveyance is 'a disposition made in favour of a purchaser ... in good faith and for valuable consideration'" then the Collector is right, but if it is "for the purpose of deciding whether a conveyance not within the words of the parenthesis 'shall for the purposes of this section be deemed to be a conveyance ... operating as a voluntary disposition inter vivos'" the Appellants are right. Grammatically the Collector's interpretation may be open to the greater criticism, but it has the merit that only within the parenthesis does one find any previous reference to "valuable consideration". It is argued on behalf of the Appellants that the Collector's interpretation is open to the more serious criticism that it makes nonsense of the parenthesis. Both sides agree that the subsection must be read as a whole and it is said that the Collector's interpretation would produce the result that the second part negates the words in parenthesis: thus, the present conveyance would be excluded by the words in parenthesis in the first part of the subsection but would be included by the second part. Indeed the suggestion is that any conveyance or transfer thus excluded by the first part would necessarily be included by the second part. I am not persuaded that that is the position. A conveyance upon sale made in good faith and for a consideration which was both valuable and adequate would be excluded and would not be affected by the second part of the subsection. Counsel for the Appellants suggested to us alternative and simpler versions of the section which, he said, would have sufficed if the Crown's present interpretation had been intended, but in my opinion they would not have had precisely the same effect. I recognize that the Collector's interpretation may produce some anxiety for conveyancers but I venture to think that any fears they may have are exaggerated and that it would not, as counsel argues, necessitate an application for an adjudication in every case of a conveyance on sale. I respectfully agree with the author of the article previously referred to when he said (at (1974) 4 H.K.L.R. 286).

"It seems that if the consideration is plainly nominal a later purchaser would be entitled to reject the title and the land officer to refuse registration of a memorial. In any other case it appears that a title cannot be questioned unless a document of title can be shown to be improperly stamped. Presumably the land officer would be bound to register a memorial unless he could show that the stamp was inadequate."

In this connection see Re Weir and Pitt's Contract (1911) 55 Sol. Jo. 536. It is notorious that valuation is not an exact science so that the Collector is unlikely to pray in aid s.27(4) unless the consideration is manifestly inadequate. In the majority of cases, I would have thought, a manifestly inadequate consideration was itself strong evidence that the vendor either intended to confer a substantial benefit on the purchaser or that the conveyance was not made in good faith. It must be rare that a the conveyance on sale is effected bona fide at a gross under value and it is only when the benefit to the purchaser is, in the opinion of the Collector, "substantial" that s.27(4) may be invoked. Whether this is a case where such an opinion was justified we do not know, for the court was not called upon to review the valuation. What we do know is that the Crown itself first set up one valuation at $76,800 and then another at $37,500, thereby conceding that its first valuation was wrong. The second may also be wrong, but s.6A gives the Collector power to ascertain the value of the property "in such manner as he thinks fit".

7. It is the interpretation of the Appellants which in the event appears to be to produce insurmountable difficulty. Mr. Mumford submits, in effect, that the second part of the subsection is a proviso (with which I agree), but unless it is a proviso which relates to the words in parenthesis it seems to me to make nonsense: if a conveyance is not taken outside the operation of the first part of the subsection by the application of the words in parenthesis that conveyance "shall for the purposes of this section be deemed to be a conveyance ... operating as a voluntary disposition inter vivos" (emphasis supplied). However one reads the second part of the subsection it could not then reverse that mandatory result.

8. It has been argued that when the Legislature alluded to case where "the conveyance ... conferred a substantial benefit" it was contemplating only cases where there was a gift or what counsel described as a "quasi gift". In support of this contention we were referred to the Oxford English Dictionary for the meaning of the word "confer" and to a passage in the speech of Viscount Cave, ...(illegible).C. in Baker v. Commissioners of Inland Revenue 1924 A.C. 270, 275 where he said:

"I think that means that a conveyance, although for value, comes within the section if it confers upon the grantee a substantial benefit beyond what that grantee gives, or (in other words) if it is in substance a gift to the person taking under it after allowing for any consideration which he brings in. In such cases the conveyance does confer a benefit - that is a gift - on the person to whom the conveyance is made, and to that extent is to be treated as a voluntary disposition".

The argument is (i) that a gift necessarily involves an intention to give and that a conveyance cannot "confer" a benefit which was not intended, and (ii) that, in any event, the second part of sub-s.(4) should not be accorded a wide interpretation which would cover the conferring of an unintended benefit. I am not persuaded that a conveyance cannot confer a benefit unless the assignor in fact intends to convey that benefit : I think it is sufficient that the conveyance shows he intended to convey the property. As to the second limb of the argument, it is true that no case has been cited to us which is on all fours with the present. Both Baker v. The Commissioners of Inland Revenue and Wigan Coal and Iron Company, Limited v. Inland Revenue Commissioners 1945 1 All E.R. 392 were cases where it was possible to infer an intention to benefit the assignee and it is by no means clear that Viscount Cave was of opinion that the subsection was confined to such cases: it was enough for the decision of the appeal before him that such cases are within the equivalent English provision. For my part I do not think the words used by the Legislature indicate such a limitation or that to read "benefit" as a synonym for "gift" can be justified.

9. The only basis upon which I might have felt able to allow the appeal would have been if we could say that the result is one which the Legislature could not have intended. I recognize that it is just possible to conceive of cases where serious injustice might result from the Collector's interpretation. For example, if two ignorant parties contracted bona fide for the sale and purchase of a piece of land which they mistakenly thought was useful for nothing but grazing but which notoriously had a much greater value for some other purpose, it might be that stamp duty assessed under Head 53(2) would so far exceed the price the purchaser agreed to pay that the only way the parties could pay that duty would be for the purchaser to borrow on the security of his equitable interest in the land itself, while if the seller had agreed to pay half the duty he might be rendered bankrupt. As against this, one must remember that the purpose of the Stamp Ordinance is to raise revenue and that a sale at an inadequate price, even though unintentionally inadequate, might tend to deprive the Revenue of duty which would normally be payable. One cannot be certain that the Legislature did not intend to protect the Revenue against just such a contingency, leaving the Collector to exercise his discretion reasonably. One may not like a provision which thus leaves the fate of Her Majesty's subjects to the discretion of a civil servant, but that must not lead us to close our eyes to the ordinary meaning of the language used or to give that language a strained interpretation in order to avoid a remote possibility of injustice. As Lord Cairns said in Partington v. The Attorney General (1869) 4 L.R.H.L. 100, at p.122:

"... as I understand the principle of all fiscal legislation, it is this: If the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be."

10. For these reasons I think the learned judge in the court below came to the right conclusion and I would dismiss the appeal.

24th January 1975.

Representation:

IN THE SUPREME COURT OF HONG KONG

(APPELLATE JURISDICTION)

STAMP APPEAL NO. 1 OF 1974

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Coram: Full Court (Huggins & McMullin, JJ.)

Date of Judgment: 24 Jan 1975

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JUDGMENT

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McMullin, J. :

The stated consideration recited in the conveyance on sale with which the present appeal is concerned was the sum of $16,465.68. The assignment was stamped under Head 19(2) of the Schedule to The Stamp Ordinance as such conveyance, the appropriate duty within that description being $350. This sum was duly paid. Subsequently at the Collector's request the District Officer, Yuen Long, assessed the value of the property at $76,800. This assessment was subsequently revised and for it was substituted a figure of $37,500. The Collector took the view that the consideration was in any event inadequate and, purporting to act under the powers conferred upon him by Section 27 of the Ordinance, he called upon the transferees (who are the appellants on the present appeal) to pay additional duty assessed under Head 53(2) of the Schedule. The solicitors for the transferees had already paid the excess duty demanded prior to the revision of the estimated value of the land by the District Officer and had, while doing so, requested that a case be stated under the provisions of Section 18(1) of the Ordinance since it was their intention to challenge the Collector's action in calling for the payment of additional duty. It is admitted that there is in any event a sum of $786 due to be refunded to the transferees consequent upon the revision of the initial estimate of the value of the land by the District Officer. It is also conceded that the sum of $16,465.68 is the whole consideration paid by the appellants to the vendor; that that sum was reached by way of an arm's length bargain and is based an a price of 15 per square foot; and that the appellants acted in good faith in this transaction. The Collector contends that he was entitled to demand the revised duty because the consideration for the transfer was inadequate and therefore, in his opinion, conferred upon the appellants a substantial benefit within the meaning of Subsection 4 of Section 27.

We have had the benefit of some interesting argument upon a section of the Ordinance which does not appear to have received very much judicial-attention, although I confess, ith respect to counsel for the appellant, that some of the contentions appeared to me to be over-subtle. Subsection 4 is not happily corded but it yields at first sight what appears to be a fairly simple meaning. The first part of the subsection provides in of fact that every conveyance or transfer other than one made in good faith and for valuable consideration shall be deemed to be a voluntary disposition inter vivos; the second part, or appendix it has been called, provides in effect that no conveyance or transfer will be included in the excepted class of transfers where the Collector is of the opinion that the conveyance or transfer confers a substantial benefit on the transferee. The final words of the subsection provide that the Collector must form his opinion by reference to two matters : (a) the adequacy or otherwise of the sum paid by way of consideration; or (b) the other circumstances of the conveyance or transfer. In other words the Collector has no power to deal with any of the excepted class of conveyances under Section 27 but he is, within certain limits, entitled in effect to say whether any conveyance is within the excepted class. In any case in which a sum of money has been paid by way of consideration which is not a mere nominal sum and which would, in the ordinary course of contract, be valuable consideration in the eye of the law the Collector is given a special power to draw down the verdict of the law against its being considered valuable consideration. His power to do so is, however, circumscribed : any consideration which would normally be a valuable consideration for a transfer will continue to be a valuable consideration unless the Collector can say that it confers a "substantial benefit" upon the transferee. This, roughly speaking, was the line taken by Mr. Lee for the Collector at the hearing of the present appeal.

I cannot accept Mr. Mumford's contention that, if the Collector's view of the interpretation of the subsection is correct, the second part thereof would operate to sweep back into the ambit of the subsection all such transfers as had been accepted from its operation by the words in brackets in the first part. These words, he contends have been rendered nugatory if the appendix is to be interpreted as the Collector would have as interpret it. I do not think that can be the case. A transfer which is, in the ordinary sense, for valuable consideration will be exempted from the operation of the section unless and until the Collector has made a determination the result of which will be to declare that in the eyes of the law it was not in the first instance for valuable consideration at all. That did not occur every case in which the only feature to attract but, presumably, only in cases which shown a striking discrepancy between what might be described as the market value of the land and the purchase price actually paid for it.

Again it does not appear to be correct to any that if it falls to the Collector to determine whether or not any transfer is within the excepted class of transfers and to do so by reference to the adquacy of the consideration there would then be no case in which the Collector would not be called upon to express his opinion under Subsection 2 of Section 27.

Under Section 27 the Collector is given two quite separate powers which are relevant to the matters we are now considering. The first of these is the power to say in respect of any transfer which is, admittedly and ostensibly, a voluntary disposition inter vivos, what amount of duty [in accordance with provisions of Section 17(1)] is chargeable in connection with that disposition. That is the power conferred by Subsection 2. The power conferred by Subsection 4 is quite different, it is the power in effect to say whether a disposition is a disposition inter vivos or not. Subsection 2 envisages a situation which may arise when parties to a voluntary disposition actually solicit the Collector's opinion while Subsection 4 envisages the case where the Collector of his own motion queries the nature of a disposition which has been brought to his attention. Of course it is true that where he does query a disposition of his own action on the basis that it appears to be for a consideration which is inadequate he will, in effect, be doing so by reference to what he deems to be its proper market value and may therefore be assign to be performing his function of assessment under Subsection 2 of Section 27 and under Section 17 as all as that under Subsection 4 of Section 27. But the two operations are nevertheless distinct.

The real substance of this appeal, as I see it, lies in Mr. Mumford's centention that the final words of Subsection 4 of Section 27 are simply not apt to cover a genuine situation of purchase and sale. He rightly points out that in neither of the two cases upon which the learned District Judge relied were the English courts confronted with such a situation. In Baker v. The Commissioner of Inland Revenue ⁽¹⁾, although the House of Lords was considering the provisions of Section 74 of the Finance Act, 1910, which are for all material purposes identical in terms with the provisions of Section 27 of the Ordinance, the facts were widely different from a simply question of purchase and sale. what was involved was an elaborate and complicated resettlement of certain estates by the tenant in tail in remainder of those estates, who was then a minor, for the principal purpose of rescuing his mother and father and their other children from straitened circumstances. A modest annual income and a life estate was secured to the minor as a quid pro quo for the settlement. There was however, as the learned Lord Chance Lor pointed out, no cash consideration at all. Although the Commissioners in their case stated referred to the inadqueqancy of the consideration the learned Lord Chancellor read ...(illegible) finding that by reason of the circumstances of the case ...(illegible) the conveyance did convey a substantial benefit on the persons to whom the property was conveyed. In other words the case was one which concerned not so much the "inadequacy of the consideration" as the "other circumstances" of the conveyance and it was principally in relation to those circumstances that the commissioners came to the conclusion that a substantial benefit had been conferred. The other learned judges were of the ...(illegible) opinion. Nevertheless their views as to what kind of conveyance would come within the wording of the appendix is of the ...(illegible) interest in the present case. At page 275 the learned Lord Chancellor, Viscount Cave having recited the words of the English provision, which are in terms identical with these in Section 27(4), goes on the say :

"I think that means that a conveyance, although for value, comes within the section if it confers upon the grantee a substantial benefit beyond what that grantee gives, or (in other words) if it is in substance a gift to the person taking under it after allowing for any consideration which he brings in."

Lord Haldane was of the view that :

"... the conveyance was one where by reason of the inadequacy of the consideration and also because the whole transaction, from its beginning and in its substance, was a provision made by the son for the family much more than for himself, the conveyance conferred a substantial benefit on those in whose favour the property was conveyed."

What is apparent from these judgments is that in addition to the cases of pure gift which are obviously within the section there are also two other categories. The first comprises cases in which although there is consideration it is of a wholly nominal nature and the second cases in which although the the consideration could not be described as nominal it is of such an inadequate nature that the primary purpose of the transfer is seen to be an attempt to benefit the transferes.

In Wigan Coal and Iron Company, Ltd. v. Inland Revenue Commissioners ⁽²⁾ the facts were if anything more remote still from a situation of purchase and sale. What they amounted to was that a shareholder in the appellant company, pursuant to the company's scheme for redeeming a part of the paid up capital, received a hundred and thirty-four shares in another company which were transferred to him, in effect, at a cost of lOs. although the value of the shares was £149. It might be said that the case was one involving a nominal rather than an inadequate consideration but Wrottesley J. considering the ...(illegible) provisions which were before the court in Baker's case ⁽¹⁾ and which confront us now said :

"It is not for the commissioners to examine and see whether the transaction can be called a voluntary disposition. It is only for them to see whether there is inade uacy in the consideration or some other circumstances from which they can come to the opinion that the transfer confers a substantial benefit on the transferee. That phrase, I think, (and everybody agrees with me; I have asked them) means a benefit over and above what is paid for at the time."

Now it seems to me that Mr. Mumford makes an arguable point when he says that the whole notion of conferring a benefit, as it has been understood and interpreted in those two cases, is quite foreign to the state of affairs which arises when two parties, at arm's length and in good faith (as is conceded to be the case here) enter into an agreement for the sale and purchase of a piece of property and the stated consideration is neither illusory, animal nor insubstantial. If he says, it had been the intention of the Legislature to provide that duty should be paid either upon the value of the stated consideration or else upon the value of the property, whichever be the greater, it would have been very simple so to provide. Although at first sight the very wide words of the appendix to Subsection 4 would seem to leave the matter wholly at large within the discretion of the Collector it is, in counsel's view, highly questionable whether they were intended to permit him to intrude upon the domain of bona fide commercial transactions at all. Mr. Mumford argued that where parties are buying and selling property in the ordinance way and where there is no question of fraud or concealment or of any indirect motive for the sale it is difficult to apply the notion of conferring benefit within the special meaning of this section. I confess I found myself, upon reflection, mere down by this argument than I was at the time when he advanced it. As he put it the section was intended to catch transfers in the nature of pure gifts and also to apply to what he termed question gifts. It might perhaps be more helpful, for the purpose as of his agreement, to refer to the latter category as pseudo-sales. Where A and B agree upon the price for a certain piece of land and the price though small, even very small, is still substantial must not the conclusion be that each of them has gained something which is of substantial value to himself? I find it difficult to dismiss the point as simply verbal. If a transaction were as fair as is ...(illegible) to have been the case here and if the parties to such a transaction were questioned, and if they answered honestly, would not each of them allege that he had received exactly as much as he had hoped and be disinclined to admit that the opposite party had been the substantial beneficiary under the agreement? In those circumstances is the Collector entitled to intervene and point out that by the standards of the market one party has wholly over-borne the other? In short where the consideration is substantial can it reasonably be said to be inadequate? The Legislature instead of making the value of the property the determinant of the quantum of duty has resorted to the language of benefit. It is that usage which makes it difficult to avoid looking beyond the transfer itself to the intention of the parties. It would I think in the ordinary way be conceded that the notion of a benefit necessarily involves the existence of a benefactor and a beneficiary an that it would only be in a loose or analogical sense that the thing given could be said to confer a benefit. In answer to this it may be said as the learned District Judge said that by using the words "conveyance or transfer" rather than ...(illegible) such as "transferor" or any cognate term the Legislature ...(illegible) there words to be understood in a sense special to the subscerion as excluding any implication of will or intention. Read in way however the words of the subsection disclose a disturbing enlargement of the Collector's powers. There may be many cases in which the transferor will be content with what might appear to a shrewder man a very poor bargain, and the Collector will fell entitled to intervene. But even in the case of a moderately poor bargain where, let us say, the land has gone for something like 4/5 ths of its reputed market value a zealous incumbent of the office of the Collector might see fit to ...(illegible) even that as conferring a substantial benefit upon the transfer If, in cases where the amount of the consideration is the ...(illegible) factor, the practice of the Collector is to be established would without regard to the intention of the parties and if every transfer which is not very close to the rate of some current national market price is to be thought of as conferring some deserve of benefit on the transferee it may be difficult to ...(illegible) more difficult still to maintain, a rule of practice supple enough to serve the interests of justice and stable enough to avoid the appearance of caprice. For example, given that a certain estate in land is worth $1,000 a stated consideration for its transfer of $1 would clearly be so nominal and unrealistic that it could not be said to be other than inadequate. For the same estate a consideration of $999 could raise no question. Between these two extremes the Collector may find that it is difficult to establish a point, related simply to the question of price, at which he ought to question the adequacy of the consideration It might, indeed, be said that the history of the present assessment is a fair illustration of the practical difficulties confronting the Collector in his role of measurer-of-benefit if the law is to be read as he would have it. Originality he thought that the stated consideration was roughly one quarter the true value of the property; at present his opinion has settled upon a value which is only twice the amount of the contract figure. That is a downward revision in the region of 50%. The Ordinance gives no means to the parties of challenging his figur s or of supplying alternative figures, of their own to establish the market rate. On such a startling review it is difficult for the court, let alone for the partier, to feel that his interpretation of the vagaries of the market is secure or that, if pressed, he might not revise his opinion again. But even if now correct is a consideration 50% lower than the market rate the proper point to declare a "substantial benefit"?

I have entered upon the submissions of counsel in come detail because I have not found it easy to resolve there doubts - notwithtending the apparent simplicity of the language of the subsection. Nor is a simple answer given by the decided cases. Although, as Wrott sley J. points out, when dealing with the position of the commissioners in England (in the passage cite supre), the Collector in Hong Kong is not asked to say whether the transaction can be called a voluntary disposition there will be cases when it will not be possible for him to deal with the question which is left to him to answer without incidentally becoming involved with the selfsame considerations which would be relevant to resolve the former question. Certainly, in ...(illegible) other these of simple sale and purchase his opinion that there has been a substantial benefit can only be formed by having ...(illegible) to the whole nature of the disposition including the intention of the parties. I think it is basic to Mr. Mumford's argument that this must be so in every case and that the Collector is not allowed simply to deem a substantial benefit where there is nothing more to guide him than some notional inadequacy in the purchase price. But it is here, to my mind, that the argument runs into difficulty.

It is true that it is the law and not the Collector which "deems" the consideration not to be valuable consideration once he has declared the situation to be one of "substantial benefit" to the transferee. The fact that there has to be a "deeming" denotes the intention of the Legislature to create an artificial category of transfers: transfers which are not, in the ordinary sense either outright gifts or bona fide sales at all. ...(illegible) facie the Collector is not asked to deem anything but simply to decipher the evidence; it is upon his opinion that a transaction is to be allocated to this intermediate category. If the Collector were obliged by Subsection 5 to form his opinion in every case by reference to the circumstances of the transaction generally and was not entitled in any case simply to restrict his scrutiny to the amount of the purchase price it might be argued that in no case would the law deem a transfer to be a voluntary disposition save where he could say that it already was so in substance. But the subsection separately and disjunctively provides for the case of inadequate consideration, and here it would seem that something like an independent power to deem is given to the Collector who need look no further nor make any sider inquiry before giving his opinion.

In cases such as Baker v. The Commissioner of Inland Revenue ⁽¹⁾ and the Wi...(illegible) Coal and Iren Company, Ltd.'s case ⁽²⁾ it may be that the Collector ill be obliged to decide that there has been a substantial benefit because the transaction is in substance a lift benefit to the transferee. That, as it seems to be is the relate of these cases. But they are decisions which seems to relate primarily to circumstances other than mere inadequacy of consideration. For that reason, and notwithtanding the compelling words quoted above from the judgments in Baker case ⁽¹⁾, neither of those cases can be said to afford conclusive support te Mr. Numford's contention. Where it is not the "other circumstances" of the transaction but purely the "inaccquacy of the sum paid as consideration" which is in question, I can find no compelling reason to say that the Collector should not be allowed to interpret his powers as permitting him, in turn, to deem that there has been a "substantial benefit" irrespective of what the parties themselves may have felt or intended in relation to their transaction.

We were informed that this was in the nature of a test case, a fact which, coupled with the dearth of authority and the assertion of counsel that the Collector has not hitherto employed his powers in this way, did not render my initial hesitations any the easier to dispel. However, for the reasons given, but not without some reluctance I too have come to the conclusion that the words of Subsection 4 are to be read simply as they stand and that the appeal must be dismissed.

Representation:

(1) (1924) Appeal Cases 270.

(2) (1945) 1 All E.R. 392.